For the employer's standpoint:
The 20k is a loan to the employee.
Any worked hours of employee are use to pay part of this loan, until paid.
The employer my might charged a small interest or not.
The employer will record a payroll expense for the amount of the employee's worked during that period.
For the employee's standpoint:
The 20k is a loan from the employer
Any worked hours is part of payments, until the 20k is paid.
The amount the employee worked for, and put towards the original 20k loan, is considered income to the employee.
For the IRS' standpoint:
Whatever the employee's earned and paid (towards the loan), must be reported to the IRS by the employer with the proper payroll deductions, remitted to the taxing authority.
Whatever the employee earned, and paid toward the 20k loan during the year, is considered taxable during the year when the income (used to pay the loan), and must be included as income in Form 1040.
So basically, part of this 20k is considered a loan to both parties, and each time the employee worked, this loan decreases. There are three transactions here: First, a loan agreement to both employer & employee. Second, a payroll expense to the employer and payroll income to the employee. Third, it's considered taxable income income to the employee, remitting deductions from the employer, and the IRS is expecting to get paid, by both!:)
AUD - 49
BEC -
NINJA in Training
FAR - NINJA in Training
REG - 55
Passed: AUD (75%'08/77%'17), REG (76%'09) & BLaw(77%'99); highest on FAR (63%'11/'15) & BEC (63%'11). Credit Hours: USA(PH)-BCom'85(4yr-grandfathered); UBC-(DAP'02/'19); DC-(BBA-Acctg.'22-4th yr)=over 150 hrs credits